Can Google rescue the Chromebook by making it more like Surface?

Google unveiled its cloud-dependent Chromebook notebooks almost two years ago … and things haven’t been going very well since. The company routinely trumpets numbers about Android device activations, but it has been remarkably silent about Chromebooks (sales figures reported a year ago were shockingly low). Sony was apparently working on a Chromebook, but we’ve yet to see it, leaving Acer and Samsung as the only manufacturers who’ve bothered to make the devices. Both companies launched new Chromebooks for the 2012 end-of-year season. While the Samsung Chromebook is seeing some success, few expect the new models to rocket Chromebooks to new heights of popularity. After all, mainstream consumers are focused on tablets.

However, a report from Taiwan’s China Times says that Google may be planning to launch its own line of Chromebooks. What’s more, these Chromebooks will apparently feature a touchscreen. Since Google placed the order itself, the devices might signal a direct move from Google into the Chromebook business.

We can’t help but notice a few things, though. An inexpensive, highly portable, touch-capable, cloud-based device with a real keyboard sounds a lot like Microsoft’s new Surface tablet with Windows RT. Have Chromebooks been ahead of the game all along, or is the fundamental problem with Chromebooks that users are just not willing to be so dependent on cloud services?

Get in touch

The idea of touch-enabled Chrome OS devices isn’t exactly new. Google was talking about Chrome-based tablets almost a year before it seeded developers with the first Chromebooks, and Google engineers have regularly acknowledged that touchscreens could be coming to Chromebooks in the future. Google’s open-source Chromium OS project (the basis of Chrome OS) has also been looking at interface variations for touchscreens, and Chromium has been laying foundations for touch-based functionality for some time.

Google already makes its own tablets in the form of the Nexus 7 and Nexus 10 (and their likely follow-ups), so it seems unlikely that the company will push forward immediately with a Chrome OS-powered tablet. That would just muddy the waters and confuse Google’s platform message, which basically boils down to Android for smartphones and tablets, and Chrome OS for more-traditional notebooks (and even small form-factor desktops like the Chromebox).

Future touch-enabled Chrome OS devices are likely to take a form similar to touch-enabled Windows 8 notebooks or Microsoft’s Surface devices. At a minimum, that means a touchscreen with a touch-enabled user interface, and it may also mean a traditional clamshell notebook form factor or some sort of convertible design enabling more tablet-like operation. Either way, if Google makes a Chromebook, it seems pretty likely the device will have a traditional keyboard (even if it’s basically a detachable peripheral or cover for a tablet).

The potential similarities with Microsoft’s Surface don’t stop there. Chromebooks have been criticized for essentially being just a platform for Google’s Chrome browser. Almost everything a user does – e-mail, word processing, spreadsheets, even image editing – happens via cloud-based Web applications. Most of the time, Chromebook users are just running the Chrome browser (albeit usually with lots of tabs). Recent versions of Chrome OS have beefed up local storage and added a desktop-esque launcher and Chromeless windows so that Web apps feel a bit more like native apps. This approach is very similar to the one-full-screen-app-at-a-time model employed by Windows RT, Android, and iOS. Users can switch between tasks (really browser windows), and the Chrome Web Store offers a way to pick up utilities and bookmarks for Chrome-savvy Web apps. The overall feel of the Chromebook isn’t much different from Microsoft’s Modern UI as exemplified in Windows RT.

ARMed and dangerous

With the addition of a touch screen, and perhaps a convertible tablet design, Chromebooks might find they’re not competing with tablets or Intel’s Ultrabooks in the same way they’re competing with Microsoft’s Surface with Windows RT. With Surface, Microsoft is trying to wed the tablet world with the traditional PC. Touch-enabled Chromebooks would likely be trying the same thing: offering a touch interface, but also letting folks have a traditional keyboard and pointer when they need it.

With the Samsung Chromebook, Google also brought the Chrome OS to ARM-based devices. Rather than relying on an Intel processor, Samsung’s latest Chromebook sports a Samsung Exynos 5 Dual processor, based on ARM’s Cortex A15 design. Although Chrome OS doesn’t run Windows applications, the ability to run on both Intel and ARM architectures lets potential Chromebooks tap both the battery-sipping technology of the tablet, as well as the more powerful x86 world – most likely as represented by Intel’s forthcoming “Clover Trail” update to its Atom processor line.

Hardware isn’t the only place Google might choose to compete with Surface. In Google Play, Google has a content ecosystem that’s easily competitive with what Microsoft can offer via its Xbox services (and Microsoft’s deal with Barnes & Noble is shoring up Microsoft’s e-book offerings). While Microsoft’s Surface ships with a native version of Office, one of the major points of Google’s cloud-based apps approach is to compete with Microsoft Office via Google Apps. Right now, every Chromebook comes with 100GB of cloud-based storage free for two years.

Google can also compete on price. Microsoft alienated many of its hardware partners, particularly Acer, when it decided to start making its own Windows hardware. After all, Microsoft pays nothing for Windows software licenses but it collects a fee from OEMs for every Windows RT license they need, which means Microsoft competes against other would-be Windows RT device makers at a distinct cost advantage.

Microsoft’s Surface with Windows RT starts at $499; Surface Pro with the full Windows 8 will cost even more. However, Samsung’s Chromebook – the most expensive Chromebook on the market – currently starts at $249, which is essentially half the price of the least expensive Surface; and other Chromebooks, like Acer’s C7, are even cheaper. In terms of hardware specs, Samsung’s Chromebook compares very favorably with the Surface.

If Google were to enter the Chromebook market, it could easily follow the pattern it has set with the Nexus 4 smartphone and its Nexus tablets and sell them at cost or near cost. With tablets and smartphones, Google is banking in app and media sales to generate profit in the long term. Being browser-driven and cloud-dependent, Chromebooks will never have the same app market as smartphones. Google is unlikely to see the same app and content revenues from Chromebooks that it does from smartphones and tablets.

However, Google still has potential long-term revenue streams from Chromebooks from Google Drive, Google Apps, and other cloud-based services. With current Chromebooks, that 100GB on Google Drive is only free for two years; after that, people need to pay for it, meaning, with the prospect of revenue down the road, Google might be able to justify selling Chromebooks at or near cost as users adopt Google Apps and Google Drive.

This chain of reasoning is a long series of “ifs,” but it could mean that Google-branded Chromebooks would not only undercut the small existing Chromebooks market (just as Google’s tablet offerings undercut Android tablets), but also that the price gap between Chromebooks and Surface could become even more glaring.

Challenges

Simply adding touchscreens to Chromebooks isn’t a guaranteed path to commercial success. Chromebooks would still face many challenges in the marketplace.

Right now, Chromebooks suffer on some performance fronts. Samsung’s latest battery-sipping ARM-based Chromebook boasts 6.5 hours of battery life – a number that would’ve been jaw-dropping a few years ago but now lags well behind mainstream tablets and even some mainstream notebooks. Intel-based Chromebooks are even less impressive, though perhaps Intel’s forthcoming Clover Trail CPU’s will change that.

Another downside for Chromebooks is that they lack native apps. Although almost everyone agrees that HTML5 and related technology are the future of both the Web and mobile computing (with mobile Flash being the highest-profile casualty), the success of the Apple App Store – as well as competitive efforts like Google Play, Amazon’s App Store, and even the nascent Windows Store – indicate native apps still rule the day. Given a choice, most people would rather play Angry Birds or watch a movie using a native application rather than a Web-based app. HTML5 may be the future, but native apps still offer features, capabilities, and (most importantly) performance that can’t be matched by Web technologies.

And there’s another big if: Microsoft has yet to prove that either consumers or businesses are willing to embrace touch-enabled notebooks, let alone devices like the Microsoft Surface that are essentially hybrids of tablets and notebooks. Microsoft hasn’t released any numbers for Surface sales yet, and we don’t expect to see them until after the holiday season – although Piper Jaffray had the iPad solidly outselling the Surface on Black Friday.

Bottom line

If Google decides to bring touch capabilities to its Chromebook line, it could add some much-needed energy to the brand and make Google’s bet on the Chrome desktop operating system seem like it was ahead of its time. However, right now, Web-based, cloud-dependent apps do not offer the features or performance of native apps running on tablets, devices like the Microsoft Surface, or on traditional notebooks. Until cloud computing and Web-based apps are truly ready for the mainstream, Chromebooks may find they remain little more than a curiosity.